FHA Loan

What Is an FHA Loan? A Flexible Option for First-Time Buyers and Beyond

For many Americans, buying a home can feel just out of reach — especially for those with limited savings or less-than-perfect credit. That’s where an FHA loan can make a big difference.

Backed by the Federal Housing Administration (FHA), which operates under the U.S. Department of Housing and Urban Development (HUD), FHA loans are designed to make homeownership more accessible, particularly for first-time buyers, low-to-moderate-income borrowers, and individuals with lower credit scores.

How Do FHA Loans Work?

FHA loans are insured by the federal government, but they’re issued by private lenders — such as banks, credit unions, and mortgage companies. This government backing reduces the lender’s risk, making it easier for more people to qualify for a home loan.

Key benefits of an FHA loan include:

A low down payment, often just 3.5%
Lenient credit requirements, typically allowing credit scores as low as 580
Competitive interest rates
Higher allowable debt-to-income ratios than many conventional loans

2024 FHA Loan Limits

FHA loan limits vary depending on the number of units in the property and the location, but here are the standard limits for most areas in 2024:

For a single-unit property (such as a house or condo): up to $498,257
For a two-unit property: up to $637,950
For a three-unit property: up to $771,125
For a four-unit property: up to $958,350

If you're purchasing in a high-cost area, the allowable loan limits may be higher. Sterling Financial Services can help you determine the exact limits based on your local market.

Important Considerations

While FHA loans offer flexibility and accessibility, there are a few key costs to keep in mind:

Upfront Mortgage Insurance Premium (UFMIP) — typically 1.75% of the loan amount, which can be financed into the loan.
Annual Mortgage Insurance Premium (MIP) — paid monthly and usually required for the life of the loan unless you refinance.

These additional costs are the tradeoff for the easier qualifying guidelines and lower down payment.

Let Sterling Financial Services Help

If you're considering an FHA loan or want to explore your options, our team at Sterling Financial Services is here to guide you every step of the way. We’ll help you understand the full picture — from loan limits and qualification to long-term affordability — so you can make the best decision for your financial future.